Episode 141 – Distribution Planning Strategies

On this week’s episode of On the Money with Secure Money, Brian Quaranta discusses how to generate monthly income after retirement through proven distribution planning strategies.

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Radio Show Transcript

Announcer 00:00

Investment advisory services are offered through foundation investment advisors, LLC. an SEC registered investment advisor. Brian Quaranta and his guests provide general information not individually targeted, personalized advice and are not liable for the usage of information discussed. Exposure to ideas and financial vehicles should not be considered investment advice or recommendation to buy or sell any of these financial vehicles. This information should also not be considered tax or legal advice. As performance is not a guarantee of future results, investments will fluctuate and when redeemed may be worth more or less than when originally invested. Any comments regarding safe and secure investments and guaranteed income streams refer only to fixed insurance products, they do not refer in any way to securities or investment advisory products, fixed insurance and annuity product guarantees are subject to the claims paying ability of the issuing company.

Brian Quaranta 00:39

How do you get retired without a distribution plan? Do you need a distribution plan because most people have an accumulation plan. And distribution is all about getting your money to work for you. And we come right back with on the money with secure money.

Announcer 00:53

And now On the Money.

Brian Quaranta 00:55

Any good retirement plans starts with the foundation.

Announcer 01:00

Asset protection, tax reduction list planning,

Brian Quaranta 01:03

these are the things that start to move you towards having a retirement plan.

Announcer 01:07

Retirement doesn’t have to be complicated. You think that’s the difficult part. That’s just getting started. And now on the money with secure money.

Steve 01:21

We are back on the money with secure money. And Brian Quaranta here, of course, I’m consumer advocate Steve’s at all Brian is President and CEO of Secure Money Advisors, you can find out more about the team at secure money advisors.com secure money advisors.com I encourage you to do that. So, you know Hey, Brian, how are you?

Brian Quaranta 01:40

Steve, I’m great. How are you doing?

Steve 01:42

Very, very well, thank you. I like the way this is gonna unfold. Because I mean, these are the questions that you must get all the time, Brian was like, you know, I’ve been a good saver, and I’ve got all this money. And I Well, what the heck do I do? Because nobody tells us that going in? I mean, we’re saving certainly. Then what?

Brian Quaranta 02:02

Yeah, well, we want to get down to what actually gets us retired, the strategies that get our money to start working for us. You know, unfortunately, a lot of radio show financial radio shows talk conceptually about things. But we’re going to talk today about how to actually really do it. And yeah, listen, when you retire, the paychecks gonna stop, bills, taxes, and all the things you want to do, though, that’s not going to stop, and that’s still going to take money. So, this is where distribution planning comes in. What is distribution planning? Well, that’s just a fancy way of saying that I need to generate monthly income from my investments. You see, if you go back 3040 years ago, Steve, you didn’t have to worry about this, because most people when they were retiring, retired with a pension. And so, a lot of people were able to able to have retirement parties. Remember those are remember those Yeah, my mom had one. Yeah, you don’t see him very often anymore, because nobody knows when they can retire. But 3040 years ago, you saw him a lot, because people knew that if they worked for an employer for 30 plus years. And you know, by the time that they were 62, they’d be able to retire with a with a nice monthly pension, maybe three $4,000 a month. And then on top of it, they would have 1000, or $2,000, and social security checks. So, there’s there would be their annual income, they didn’t have to worry about saving a large sum of money. They didn’t have to worry about managing a 401 K or an IRA in the way that we do today to where the primary responsibility of those accounts is to generate monthly income. So, the problem that we have today is that we have this grand experiment going on in our country where employers got rid of the pension and replaced it with retirement accounts like 401 K’s, that’s great. They’re still given us a way to save. But I like to call these accounts, the yo-yo retirement plan. And that’s you’re on your own, you have to figure out how to create a pension with this money for the rest of your life. And as a lot of financial experts will tell us the challenge right now going on in retirement is that people are living longer and spending more time in retirement. I just had a lady come to my office, Steve, she’s going she’s going into her 42nd year of retirement.

Steve 04:22

Holy cow.

Brian Quaranta 04:23

Do the math on that. Yes, she was she was going into her 90s She did drive herself to the office. And you want to know what she did for the longest time with the money. She saved what she bought, she bought bank CDs, and she said, Brian, I always bought bank CDs because my money was safe. And I would use the interest every year that I earned to pay my taxes to pay the gas bill to go on vacation to give money to my kids to my grandkids and now I can’t do that anymore. And I said Well, tell me a little bit more about that. She says well the banks only given me point one 5% on my money. So, Steve, are you sitting down. Yeah, on $500,000. This lady, this lady was getting $490 a year in interest from the bank

Steve 05:09

Well, I hope you got her straightened out.

Brian Quaranta 05:12

All right, folks, the problem is, is the banks don’t want our money anymore. So where do you put it? Now, I’m going to say a dirty word. And some of you might cringe when I say this, but the word is annuity. I like it.

Steve 05:23

I embrace it, because you taught me well, Brian.

Brian Quaranta 05:25

Well, people need to realize that annuities are the new banks, the insurance companies are the new banks, that’s where you get safe money. Because at the end of the day, we all want safe money that we can have access to. So, I’ll give you a good example. So, she’s earning $490, a year on this half a million dollars that she’s got at the bank. So now, there’s lots of different annuities you can buy, but I kept it very simple for her being the age that she was at 90. All we did was buy a fixed annuity. Now this fixed annuity, paid an interest rate, a guaranteed rate of 3.3%. Okay, that meant that her $500,000 was going to generate now almost $17,000 a year in interest.

Steve 06:13

That’s a big difference, holy cow!

Brian Quaranta 06:14

You’re talking about 1000s and 1000s of percent more in interest than what she was just getting. Now, why are so many people scared of something as simple as a fixed annuity? It’s because of financial pundits that are out there that say, I hate annuities. And you should, too. You know, which we all know who that person is. And the reality is he’s doing the American public a disservice. Because think about market volatility right now. You know, January has been encouraged January was an incredibly volatile month, the market still tends to be very volatile right now. And if you’re a person in retirement right now, and you’re relying on the money that you’ve accumulated, over your working years to live off of my question is, if the market doesn’t cooperate, and you continue to take money out of your portfolio, when the markets not cooperating, you are going to have a risk that shows up called sequencing risk. So, this is when you pull money out of your accounts, during down markets, you lock into losses, and you compound the loss. What do I mean by that? Well, let’s say that your portfolio lost $40,000. And on top of it, you need to take 20,000 out. So, you lost 40,000. But now you take 20,000 out now you’re down 60,000. This is compounding losses. So, we believe in utilizing SAFE accounts to generate cash flow. Why? Because we all know the basic fundamentals and I don’t care if you’re a do-it-yourself investor. I don’t care if you’re paying a financial advisor. At the end of the day, we all know the only way to be successful with our money in the stock market is to have time well how in the world are you going to have time with your money if you need it right now, you need to create a strategy that allows the money that you keep in the market to have time to grow. This is why you should consult with a financial professional. So, for the next 10 callers who call in right now we are going to give you a complimentary right track retirement review folks, I’ve seen people charge up to $1,000 or more. For the types of reviews that we do, we literally are going to take the mystery out of financial planning and give you the clarity that you deserve the peace of mind that you deserve going into retirement by teaching you strategies beyond Wall Street, you can’t have 100% in Wall Street, it just doesn’t work. And I believe in Wall Street we do investments here at Secure Money Advisors but you also have to create safety within the portfolio. So again, for the next 10 callers it’s a complimentary right track retirement review. We’re gonna give away to the next 10 callers but you got to do your part. Give us a call today and schedule with us

Steve 08:49

800-656-8616 10 callers right now get that comprehensive financial review. You’ll see where you are today. Yes, but more importantly, you’ll find that you’ve now got a roadmap that can help get you to where you need to be when it comes to retirement. 800-656-8616 again 800-656-8616

Brian Quaranta 09:09

You’ve been a good saver for retirement, but that’s only half the job. The other half involves making smart decisions about withdrawing those hard-earned hours when we come right back with on the money with secure money

Announcer 09:26

do you ever feel like you’re fighting for financial knowledge? Don’t let that advice be a punch in the gut your retirement to take advantage of a complimentary no cost no obligation consultation with a local trusted financial coach called Brian Quaranta host of retirement you radio 800-656-8616 or text Brian Q to 800-656-8616 we’ve made it easy for you to take advantage of this fantastic offer. All you have to do is call or text Brian Q two 800-656-8616

Steve 10:03

We are back on the money with secure money. And Brian Quaranta and consumer advocate Steve. Brian is the President CEO of secure money advisors. He’s an independent, he’s a fiduciary. He’s got a great team of folks that secure money advisors and secure money. advisors.com is the website. And so yeah, this first segment, you know, we’ve covered a lot of ground, Brian, in terms of just a basic philosophy really of getting ready to retire. Well, we

Brian Quaranta 10:26

were just talking about the banks not wanting your money. Yeah, right. Yeah, they don’t I mean, obviously, they they’ve got money coming in from other places. So, they don’t have to pay us to borrow our money anymore. Right. I mean, that was the whole concept. I mean, is that the reason why you’d get an interest rate to put your money at the bank, and they wanted your money, but because of, you know, quantitative easing, and the way that the federal government has injected money into the markets, the banks just don’t need our money anymore. So, the problem is that we’re actually losing money safely at the bank,

Steve 10:58

why don’t like losing money at all, much less safely? Well, that’s, that’s,

Brian Quaranta 11:02

I mean, that’s really the problem with Safe Money that isn’t earning anything is the fact that when, you know, let’s say, you’ve got $100,000 in the bank. Well, at the end of the year, when you look at it, you’ll probably still have $100,000 in the bank, maybe a little bit more, you know, maybe $100,150 or something, right? Sure. But with seven and a half percent inflation, what you don’t see is that that money, probably loss seven to $8,000. Right? So, think about it, then if you could actually see that projected on a statement that your money that’s sitting in the bank, is now worth $93,000, how would you feel? And the reality is, that’s what’s happening? You just don’t see it? Because that’s the problem with inflation, it’s a stealth tax. They call it a stealth tax, right? Kind of like the stealth bomber, you can’t see it. Yeah, that’s what stealth taxes are all about. So, but I want to continue to talk about generating cash flow in retirement, because I think people are really not approaching this the right way. And my industry is to blame, you know, my industry tends to buy into a concept called the 4% rule. And the use of the 4% rule can be actually traced back to a financial advisor by the name of Bill Benjamin, who originated the 4% rule, which many people use to guide their retirement withdrawals, including financial advisors. My concern is that a lot of these advisors really don’t understand the risks that they’re putting their clients at by simply using the 4% withdrawal rule. Because there is a probability of failure with this rule, depending on the returns that you get throughout your retirement, and this is called sequencing risk. But the rule determined that withdrawing 4% from retirement fund in the first year followed by inflation adjusted withdrawals every year, should ensure money is available to sustain about a 30-year retirement. Now we started this segment off with me telling you about a lady that just came to my office that was going into her what year of retirement Steve?

Steve 13:09

40th year? 42nd. 42nd year

Brian Quaranta 13:13

Yeah, the 4% rule, the 4% rule says it should keyword here, folks should ensure that the money is available to sustain a 30-year retirement. Well, the plane should make it to New York, the plane should make it to New York, speaking of planes, yes. And speaking of planes, folks, imagine this. So, the Wall Street Journal put an article out this is probably a few years ago on this 4% rule, looking at its probability of success versus failure. And what they had determined was based on this thing called sequencing risk. And again, sequencing risk to simplify is, you know, let’s say that you retire this year, and in your first year of retirement, you take a negative return in your market account, you’re actually going to have a higher probability of running out of money than somebody that retires, and the first year the market goes up. Okay. So based on the returns that you get earlier on, whether it’s positive or negative are going to determine your level of success by utilizing this strategy when taking income. But the Wall Street Journal did the article and they said, depending on returns, they’ve given a number of different returns that they were projecting, but in some cases, there was up to a 56 to 57% chance of the 4% withdrawal rule failing. Wow. So yeah, well imagine, imagine the odds of that on a plane. So imagine you’re supposed to get on a plane today. And you know, right before you’re about to back out of the gate, the captain gets on the intercom. And he says, Hey, folks, I just want you to know, we got word from the tower, that there’s a 57% chance that the plane may crash into the ocean. Before we get to our destination, how many people would get off that plane? You know, I wish everyone would, one would hope everyone would unless that plane was going someplace that they needed but the point of that conversation is the fact that if there’s a high probability of failure, that we need to look at different strategies to use it, you know, when we were talking about utilizing the bucketing strategy, so you can use, you know, three buckets of money, you can use two buckets of money. But you know, let’s just use two buckets of money. Sure, as a very simple approach to this conversation. Let’s say somebody’s got, you know, a million bucks. And, you know, you can do this with all kinds of money. I mean, you could do with 500,000 200,000, it doesn’t matter, but we’ll just choose a million dollars. And let’s say you need a cash flow, let’s say that you needed, you know, let’s say you need a $25,000 a year cash flow, okay, well, if I take $500,000, and I put it into a guaranteed safe bucket, and let’s suppose that that guaranteed safe bucket gave me a three to 4% rate of return, I’ll go on the lower end and say it gives me 3%. So, on $500,000, I know that I’m gonna get roughly about $15,000 a year in interest, well, what happens if you need $25,000? a year in interest, okay, so that’s all right, I’m going to take the $25,000 a year out, and I’m slowly going to deplete that account over time, right? Because if it’s only earning $15,000, a year in interest, and I’m taking 25,000 out, then I’m going to dip into principal, well, that’s okay. Because I might have another $500,000. In a long term, market strategy, right, invested tactically in the market. And let’s just say I’m gonna go on the low end, and you get maybe a six and a half 7% rate of return there. So, while your safe bucket of money is providing you with the cash flow that you need, and again, it doesn’t matter take market volatility right below, so month of January is very volatile. If you took money out of your money out of your account, in the month of January, you’ve compounded your loss, okay, because the market went down, and then you took money out, you compound your loss. So, we have that money that you need in a safe bucket, and we’re generating that nothing happened. This is why I built the right track Retirement System, Steve, the reason we did is to give people the clarity of how to approach retirement, especially distribution planning, because nobody’s teaching them how to start using their money. So, folks, for the next 10 callers who call in right now, we are going to give you a complimentary right track retirement review. Now I’ve seen other people charge up to $1,000 or more for similar features or offers, we are going to do this complimentary, but you got to pick up the phone and call us today, we will take the mystery out of financial planning for you. We’ll talk to you about five key areas of retirement, we’ll show you how to generate income, we’ll show you how to mitigate taxes. We’ll show you how to properly invest the money. We’ll show you what would happen if you had a health event and of course, making sure you got a good estate plan because you certainly don’t want to leave Uncle Sam is your largest beneficiary. And unfortunately for most people, that’s what’s going to happen. Take advantage of this today. It’s a complimentary right track retirement review. Again, I’ve seen other people charge up to $1,000 or more, we’re going to do it at no cost when you schedule a call today.

Steve 17:39

800-656-8616 make that call while you’re thinking of it 800-656-8616

Brian Quaranta 17:47

Is the 401k the be all end all best tool ever to save for retirement? The short answer is no. When we come back, we’ll outline three reasons why the 401k may not be right for everyone, when we come back with on the money with secure money.

Announcer 18:04

He’s letting the clock run out on his social security at age 70 For maximum benefits. And here comes the Roth conversion. He’s got some outstanding coaching with that lifetime income plan. He’s created his own pension as well. And it looks like he’s going to go All! The! Way!

Play your best retirement game call Brian Q 800-656-8616 or text Brian Q to 800-656-8616. Call or text Brian Q to 800-656-8616.

Steve 18:40

Were back On the Money with Secure Money. Brian Quaranta here I’m consumer advocate Steve and of course, Brian is President and CEO of secure money advisors, where you have an incredible team of people and I’ve had the pleasure to get to know some of them over time. And again, you just do a heck of a job in terms of building, building a team that really matters in that and more importantly, that they care.

Brian Quaranta 19:03

Yeah. Well, I appreciate you saying that. Because you know, it’s the feedback that I get a lot from people that do seek our services out. They’ll always say, you know, your team is so welcoming. Everybody is so professional, they truly care. And look, we know that you know coming and visiting a financial office can be a very intimidating process. And maybe you’ve been a listener of the show for a long time. And maybe you haven’t scheduled an appointment yet because you’re intimidated with what it might be like when you walk through the door. Let me assure you that everybody at secure money advisors is truly here to help. Number one, we are problem solvers. We are problem identifiers, and we are problem solvers. We are not here to judge you on what you’ve done. We’re not here to judge you on how much money you have saved or haven’t saved. We’re not there to criticize anything. We’re there to truly understand where you’re at and where you need to go. So, coming in and meeting with us should be a pleasant experience. You know, we’re not, we’re not here to sell anything. We are fiduciaries, which means that we’re held to a high standard of doing what’s in our client’s best interest. We’re, we’re not commission based with the money that we manage. So that means that, you know, we have to actually perform in order for us to make a living. And that’s a good thing, because we have skin in the game with our clients, you know, if the markets aren’t going well, we’re feeling the pain just as much as they are so. But at the end of the day, the one thing that I’m very proud of is a team of people that we have put together here. And, you know, if you have been fortunate to be a client of secure money advisors, I thank you for all the kind words that you’ve shared with us over the years. And all we do is continue to work as hard as we can to get better and better. And most importantly, you know, our job is to provide world class service, because anybody can talk to you about managing your money. The question is, are you actually going to get the service that you deserve throughout the years, and our servicing model is very unique. Or clients get access to unlimited financial planning appointments throughout the course of the year, we truly become their financial sounding board, we become their chief financial officer. And that’s great, because you know, if they’re looking to get a new job, leave a job, retire, whether they’re dealing with a death, looking to buy a home, sell a home, buy a car, or lease a car, it’s nice to know that you can pick up the phone and call a team of people that can help you make an informed decision financially. So, it’s one thing I’m very proud of it’s Secure Money Advisors to team of people, if you haven’t gone out to our website yet, WW at secure money advisors.com, check out our team page. You can see everybody that’s there. And, but let’s get to some questions, we don’t have a whole lot of time, ya know.

Steve 21:49

800-656-8616. Just want to sneak that in for you. William is up first. He says I’m 55 I plan to switch to a new and likely less lucrative career; I would need to tap quite a bit of my retirement money to supplement my new venture. How can I get the highest payout and avoid that 10%? early withdrawal penalty?

Brian Quaranta 22:09

Yeah, well, yeah, let’s see. So, you know, if he’s 55, I’m assuming if he’s working, maybe he’s got a 401 K, you know, the 401k will allow you to do what they call the 55 rules. So, you know, if he kept the money in the 401k, he would have access to it as early as age 55. And he could avoid the 10% penalty. You know, the mistake that people do make is that if they do need cash flow, and they’re under the age of 59 and a half and or they want to retire early. If they roll that money out to an IRA, they lose the ability to access that money without incurring the 10% penalty. But you know, getting the highest payout. I mean, that’s tough. I mean, what’s the, you know, what’s the balance of the account? What, what will those payouts do to the balance over time? There’s, there’s a lot of information that bill would have to give us here in order to get a really great answer. But I will say just from basic fundamentals, for those of you that are listening, if you do plan on retiring early, and you have a 401k Be very careful that you don’t roll that to an IRA, especially if you’re going to be cashflow, because you’ll disqualify yourself from being able to use the 55 rule where you can take money out early

Steve 23:20

WM 800-656-8616. If you want to reach out and talk to Brian, Eric has a question. He says my wife and I filed taxes jointly, we’re both approaching 50 years old and currently have a combined 750,000 In traditional 401k Money, both of us are still working and have a taxable income of 150,000. I want to switch future contributions from my traditional 401 K to a Roth 401 K, we currently give 35,000 to our 401 K’s if I switch to a Roth 401 K, that’ll push us to the 24% tax bracket. My goal is to have some untaxed income to fade our tax burden in retirement. Is this a bad idea?

Brian Quaranta 24:03

Yeah, that’s a good question. What he’s talking about here is creating a tax-free bucket. So, if he wants to start contributing to his Roth portion of his 401k, he’s not going to get the tax deduction. So, by not taking the tax deduction, he has to claim that income which could push them in what he’s saying into a 24% tax bracket, I’m okay with that. I personally do that stuff myself. Because I truly believe that I would rather pay taxes on the seed versus the harvest. Right? You know, in his case, if he’s gonna put away 35,000 a year, maybe the time he retires, that Roth portion of his buckets worth four or $500,000, but it’s all tax free. And by the way, he doesn’t have to take RMDs then when he passes on to his family members, they don’t have to pay taxes. So, it’s a really great thing all the way around. And of course, in retirement when you’re looking to generate income. It’s always nice to have a bucket of money that is also tax free when you pull money out. So, folks, this is exactly what we do here at secure money advisors. the right track retirement review is what we’re talking Going about today, if you haven’t taken advantage of a complimentary right track retirement review, please do so now for the next 10 callers who call in right now we are going to give you a complimentary review. Now I’ve seen other people charge up to $1,000 or more for these types of reviews, we are going to do a complimentary a truly is going to take the mystery out of financial planning is going to show you where you are where you need to go. It’s going to give you turn by turn directions of what to do and how to create the best retirement that’s going to give you the most peace of mind clarity in retirement. So, for next 10 callers it’s a complimentary right track retirement review, pick up the phone and schedule with us today.

Steve 25:35

800-656-8616 That’s how you get the ball rolling. Just make that call to Brian, come on in, sit down, get a financial roadmap put together 10 callers right now we’ll get that comprehensive financial review, you’ll see where you are today. But more importantly, you’re going to have a roadmap that’ll help get you where you need to be when it comes to retirement. So, in short, you got nothing to lose 10 collars. 800-656-8616 again, 800-656-8616 Brian, as always, a pleasure to have these conversations with you. I love learning things and you teach us every week.

Brian Quaranta 26:06

Steve, great to see you again. Folks. We’ll see you again next week have a great week.

Announcer 26:17

Investment Advisory services are offered through foundation investment advisors, LLC, an SEC registered investment advisor Brian Quaranta and his guests provide general information not individually targeted, personalized advice and are not liable for the use of drip information. Discuss exposure to ideas and financial vehicles should not be considered investment advice or recommendations, buy or sell any of these financial vehicles. This information should also not be considered tax or legal advice. Past performance is not a guarantee of future results. investments will fluctuate and when redeemed may be worth more or less than when originally invested. Any comments regarding safe and secure investments and guaranteed income streams refer only to fixed insurance products did not refer in any way to securities or investment advisory products. Fixed insurance and annuity product guarantees are subject to the claims paying ability of the issuing company.

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